9911796707
|
Home
Issues Involved:
1. Whether the Tribunal was right in holding that the assessee's major requirement for its loan was to meet its taxation liabilities. 2. Whether the amount of Rs. 2,83,614 was deductible in computing the assessee's profits and gains of business. 3. Whether the amount of Rs. 2,83,614 was deductible in computing the chargeable profits for the purposes of the surtax assessment for the year 1967-68. Issue-wise Detailed Analysis: 1. Major Requirement for Loan: The Tribunal concluded that the assessee's major requirement for the loan was to meet its taxation liabilities, based on the letter dated 18th January 1965, which indicated an immediate need for funds to meet taxation liabilities of Rs. 10 lakhs. The Tribunal noted that the loan was also intended for financing the Barauni Oil Refinery contract, but emphasized the immediate taxation liabilities. The court found this question to be academic and declined to answer it, as the latter part of the Tribunal's order, which did not challenge the major requirement, was not contested. 2. Deductibility of Rs. 2,83,614 in Business Profits: The assessee argued that the extra amount of Rs. 2,83,614 incurred due to the devaluation of the Indian rupee was a business expenditure under Section 37 of the I.T. Act, 1961. The revenue contended that no actual expenditure was incurred, and any loss was of a capital nature. The Tribunal held that the liability to pay the extra amount was contingent and not an actual expenditure. The court considered various precedents, including Indian Molasses Co. v. CIT and Metal Box Company of India Ltd. v. Their Workmen, and concluded that the liability arose during the relevant period due to the devaluation. However, the court determined that the loss was of a capital nature, not a revenue loss, applying the principles from Shell Co. of China Ltd. and other relevant cases. The court affirmed the Tribunal's decision, holding that the loss was not deductible as it was capital in nature. 3. Deductibility in Surtax Assessment: This question was consequential to the second issue. Given the court's decision that the loss was of a capital nature and not deductible in computing business profits, the court also held that the amount was not deductible in computing the chargeable profits for the purposes of the surtax assessment for the year 1967-68. Conclusion: The court affirmed the Tribunal's decisions on all issues, holding that the loss incurred due to the devaluation of the Indian rupee was of a capital nature and not deductible in computing the assessee's business profits or chargeable profits for surtax assessment. The court declined to answer the first question regarding the major requirement for the loan, considering it academic.
|
